Stop claiming you’re profitable

My company is profitable, and has been from day one. — every high-tech bootstrapped founder

I know what you really mean.

What you mean is that the only business-related charges on your PayPal MasterCard — aside from those on intentional detour for tax-deduction like the external DVD drive you needed to rip CDs after you realized the MacBook Air in all its luxurious, silent, thin, sexy glory still cannot import “The Best of Pat Benatar” without the aid of a peripheral half the size and weight of the laptop itself — is an account with Amazon AWS where a medium instance whirs away for only $40/mo, just two clicks away from rebirthing as an XXL should you need “scale,” plus $0.67/mo for the S3 storage for web app uploads, plus $0.072/mo of S3 storage to back up the Pat Benatar mp3s.

So all you needed to do is sell one $49/mo account — which you did — and you’re profitable!

I know that’s what you mean, but when you say “I’m profitable” to someone with a modicum of experience it’s a turnoff, because it’s actually bullshit. And when someone’s streaming bullshit at 720i, it means they’re either a full-blown bullshit artiste or they’re merely ignorant; in neither case do I want to hear more.

The first and biggest error is thinking you can ignore your own salary. Sure your time is worth $1000/hr, but no you do not have to cover that to be dubbed “profitable.” But you do need at least a ramen-profitable definition of valuing your time. If your business makes $3000/mo after direct expenses, but isn’t paying you, and you still have a full-time day job to keep up with the mortgage on your under-water house, then you’re not profitable.

Why not? Because the business cannot sustain even one person to run itself, which means that $3000 is not “extra money which can be plowed back into the business or distributed for an awesome vacation.” It’s just made-up leftovers because you’re not acknowledge the actual costs of a startup, which include time and you having to work a second job.

In that case what have you proved? That if you slam yourself to the limit of endurance and ability, you can earn less money than Dell would give you for creating 1/34th of BIOS version 8.4.3.5?

That’s not a “profitable business.”

If you are living off it, even if that’s $3000/mo, then you’ve made it. You might not have a dynamo on your hands (yet!) but at least you’re in a somewhat sustainable place. Maybe next month you’ll make $3200 and you can “plow that extra $200 back into the company.”

The other error is that it’s a misuse of what’s normally connoted by the phrase “profitable business.” When someone says they’ve been in business for two years and they turned profitable last month, what that really means (if it’s a healthy, growing business) is that they are sustainably profitable, able to indeed “plow the rest back into the company” with a quantity of cash that could visibly move the needle on top-line revenue, or could significantly reduce further risk, or would allow for investment in a long-term project, or could be a down payment on a superstar, or something similarly valuable.

When your business throws off $1500/mo (without salaries), that’s not the case. If you’ve been at this for a year, clearly next month won’t be $5000, which means even in the sense that it’s “kicking off cash” it’s not sustainable in the long-term, not defensible in the market, not supporting even one human being in that effort, etc..

Therefore, in the normal sense of the phrase “profitable business,” it’s not.

So now that I’ve perhaps unfairly ridiculed you, let’s just recognize what’s really going on, because it’s wonderful and amazing and fantastic and exciting:

You’re building a business! Sure it’s just begun, sure it might need a kick in the ass, sure it might be struggling, sure sure sure, so what? You and every other little new business. You and every other bootstrapper who by very definition doesn’t explode out of the blocks because you’re doing it part-time and with no cash. This is exactly what you’d expect it would do, even if you’re actually the next 37signals.

That’s exactly what my company WP Engine looked like for the first 9 months. Now we’re making millions of dollars, employ 20 people, growing at 15%/mo, etc.. But we started just like that — slowly, and not profitable.

Same with my previous company Smart Bear — it took 2.5 years before I could even hire one employee, and even then it was 1/4 of the salary he deserved (and later ended up making). Eventually we, too, made millions of dollars a year — in profit! — but not for years.

In other words, there’s nothing strange or bad here. It’s just not “profitable from day one.” Stop saying that.

Dispense with the feather-fluffing and get to what is — the strengths you have, the challenges you want to overcome, the resources at your disposal.

And then set your mind and goals on making that sucker profitable for real!